Question

Merck, the pharmaceutical company, has taken more than a thousand drugs through the federal approval process and so can do it more cost efficiently than many of its competitors who are relatively new to the industry. Which of the following refers to cost savings that come to Merck in the drug approval process?
A. location economiesB. economies of scaleC. ancillary effectsD. learning effectsE. exponential effects

Answer 1

Answer:

B. economies of scale

Explanation:

Economies of scale refers to the microeconomic property that helps firms reduce costs when they produce output at a large scale, since the total production costs are spread over a larger quantity of units, meaning that the cost per unit decreases.

In this case, Merck is using economies of scale by sending thousands of drugs to the FDA, meaning that the test cost per drug will be lower than if it had sent only a few drugs to the tests.

Answer 2

Answer:

The correct answer is: D. learning effects.

Explanation:

The alternative that refers to the cost savings that Merck obtains in the drug approval process is: learning effects.

This is a process that corresponds to the relationship it has between education and increased productivity. This means that the more you learn about a product or service, the greater its value.

This process can be applied to experience, that is, it is possible to more effectively analyze differences in productivity or income according to education or experience about certain variables.